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Why Is Ligand (LGND) Down 14.9% Since Last Earnings Report?

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It has been about a month since the last earnings report for Ligand Pharmaceuticals (LGND - Free Report) . Shares have lost about 14.9% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Ligand due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

Ligand Beats on Q3 Earnings & Revenues, Raises View

Ligand reported third-quarter 2018 adjusted earnings of $1.32 per share, significantly up from the year-ago figure of 69 cents. The bottom line also beat the Zacks Consensus Estimate of 99 cents.

Total revenues in the quarter increased to $45.7 million from $33.4 million in the year-ago period. Moreover, the top line surpassed the Zacks Consensus Estimate of $42.9 million.

Quarterly Highlights

Royalty revenues were $36.1 million in the reported quarter, up approximately 64.8% year over year. Ligand primarily earned royalties on sales of Novartis' Promacta, Amgen's Kyprolis and Spectrum Pharmaceuticals' Evomela, which were developed using Ligand’s Captisol technology. The increase in royalty revenues was mainly driven by higher sales recorded by Promacta and Kyprolis, which are on track to achieve blockbuster status this year.

License fees, milestones and other revenues were $2.5 million compared with $3.8 million in the year-ago quarter. Material sales decreased 9.1% to $7 million in the year-ago quarter due to the unfavorable timing of Captisol purchases for clinical and commercial use.

Research & development (R&D) expenses increased 14.6% to $5.5 million and general & administrative expenses rose 37.1% year over year to $9.6 million.

Business Developments

During the quarter, Ligand also entered into a license agreement with Fred Hutchinson Cancer Research Center, granting the latter rights to use the OmniAb rodent platform technologies to develop new products. Ligand will receive a share of revenues from the sale of any product developed using this technology. The company also signed a Captisol use agreement with Sunshine Lake Pharma.

2018 Guidance Raised

Ligand increased its guidance for 2018 for the second consecutive quarter. It now expects full-year revenues to be approximately $240 million compared with its previous guidance of $232 million. The expected revenues include royalties of nearly $122 million, material sales of roughly $25 million and license fees and milestones of almost $93 million with the potential for up to an additional $5 million in license fees and milestones. Adjusted earnings are estimated to be $6.52 per share for 2018 compared with $6.30 expected previously.

How Have Estimates Been Moving Since Then?

Fresh estimates followed a flat path over the past two months. The consensus estimate has shifted -7.48% due to these changes.

VGM Scores

Currently, Ligand has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Ligand has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.




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